Comparing the Unemployment Protections of Private Lenders

In an ideal world, you find a great job with a good career track. The steady income helps you make on-time student loan payments.

That’s in an ideal world.

But we live in a world, or at least a country, with $1.44 trillion in combined student loan debt. Eleven percent of borrowers fall behind on payments, which is why employment protections like economic hardship deferment are so important.

Consider that 33,000-plus jobs were cut in May alone, according to Challenger, Gray & Christmas. Having the ability to pause payments in the event of job loss gives borrowers some breathing room.

Of course, once you leave the federal loan system, you find that not all private lenders offer this level of protection.

The difference between federal and private protections

Protections like deferment and forbearancevary depending on whether your loans are from the federal government or a private lender.

With a federal loan, you may be able to temporarily stop payments by applying for either type of relief. A borrower could enter deferment for as long as three years or forbearance for as much as one year.

Unlike federal loan servicers, private lenders aren’t held to a specific standard set of protections. The options available to you are dependent on the private lender you work with.

Private lenders’ economic hardship deferment and forbearance options

Some refinancing lenders are more generous than others when it comes to student loan unemployment deferment and forbearance. Consider the following lenders.

Among these lenders, you’ll find some creative solutions for serious problems. Fintechs are known for their customer-focused initiatives, and some of those listed below are no exception.

While these protections still fall short of those offered by federal loans, it’s nice to know these refinancing lenders may have your back.

1. SoFi offers Unemployment Protection to aid out-of-work borrowers who weren’t fired for cause. This forbearance period can span 12 months and is awarded in three-month increments. A borrower with a cosigner who maintains employment isn’t eligible for relief.

The unique part of SoFi’s forbearance option is that it comes with job-placement assistance from the company’s Career Advisory Group. You can work with a career coach, get resume help, and more.

2. Laurel Road offers up to a year of forbearance. This option is only available at the bank’s discretion, so not every situation will qualify.

3. CommonBond touts its CommonBridge program, which allows its customers to pause loan payments. It offers up to 12 months of forbearance in the case of economic hardship, whether caused by job loss or something else.

4. Education Loan Financehas no company-wide policy on protections, but does claim to “work with everyone that has an issue or situation that arises.”

5. Earnest reserves its forbearance protection for borrowers who have lost some or all of their income. Customers with unforeseen expenses such as a hefty hospital bill can also qualify.

The lender also offers other forms of repayment flexibility:

Get 36 months of deferment when you attend an accredited graduate school

Push back (or move up) a payment due date by seven days

Skip one payment per year after six straight months of on-time payments

Bigger banks with student loan unemployment deferment and forbearance

They may offer both forms of relief but are likely shy about advertising either.

Unlike federal loan servicers, your private lender doesn’t have to grant you relief. Via their websites, they do generally encourage you to phone their customer service support if you expect to miss a payment due date.

6. Citizens Bank offers both types of protection. It notes that a borrower must make 36 straight months of on-time payments after leaving deferment or forbearance in order to release a cosigner.

Deferment: Citizens Bank offers return-to-school deferment, meaning that you could pause your loan payments if you return to campus.

Forbearance: The bank also offers economic hardship forbearance. It can be awarded in two-month periods for a maximum of 12 months. You must make nine payments before becoming eligible for forbearance, and can’t qualify for more than two forbearances in one five-year period.

7. First Republic, for its part, is upfront about its lack of protections. Its website includes the qualifier: “…this product does not contain special features such as forbearance periods and income-based repayment plans…”

8. Wells Fargo offers deferment and forbearance. However, by enrolling you lose any discounts, such as a lower interest rate for automatic payments.

Deferment: Available while in school, plus six months after graduation, depending on your school and loan type.

Forbearance:Beyond in-school forbearance, Wells Fargo offers other options, including what it calls current extension. Customers experiencing financial hardship can receive forbearance for either two months or six months at a time for up to one year. Forbearance can be requested twice per year.

Community lenders with student loan unemployment deferment and forbearance

Like other community lenders, the three banks below are platforms that connect you with smaller banks and credit unions. They can’t necessarily promise what their partner lenders will offer.

9. LendKey offers up to 18 months of forbearance to its borrowers, but the “up to” is an important qualifier. Prepare for the possibility of receiving a quote from a community bank that may have little to no protections.

10. Purefy does not offer deferment, but its partnering lenders — Citizens Bank and Pentagon Federal Credit Union — do offer forbearance on a case-by-case basis.

11. iHELP says it has forbearance options for borrowers who qualify. It also promises the flexibility of a 24-month period during which you could make interest-only payments.

Gauge your need for deferment protections

Before moving forward with any kind of loan deferment, you should be aware of the pros and cons of doing so. Accruing interest, for example, can significantly increase the size of your loan when you stop making payments.

If you have stability in your personal life and career, you might prefer a lender that’s light on protections but offers great interest rates. In an ideal world, of course, you’ll find a lender that offers both.

For borrowers in more tenuous situations, work with a lender that offers an array of economic hardship deferment and forbearance options. It could make all the difference.

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